(Dzung Trieu Law firm)_Outdated legal regulations on professional ethics among auditors make it difficult to tighten their responsibility in discovering any tax fraud by their clients.

With many foreign-invested enterprises (FIEs) in Vietnam apparently reporting “false losses, actual profits”, many have queried the responsibility to be held by the auditing companies that approve their compulsory financial reports.
But the fact is that auditing companies do not bear any specific legal responsibilities in identifying fraud hidden systematically in piles of receipts and invoices, nor in reporting them to authorities or the public. The ethic they follow is in being selective with their potential clients and intensifying their audits when they have doubts before putting their name on their clients’ financial reports. “We don’t accept all companies approaching us for our auditing services,” said Mr Tran Anh Quan, Partner at KPMG, whose main clients are FIEs. “We firstly assess the risks of potential clients  and the audit following our systematic procedures which are established following Vietnamese and international auditing standards. 
We only accept an audit if we consider that we are capable of performing the work and able to manage the risks. In the case that risk of misstatement in the financial statements is hight we would have to perform a lot more work than if the risk is moderate or low.”
He added that it is common practice during auditing for auditors to note mistakes in accounting books of clients and then assess how big such mistakes are. “If there are doubts that there may be other errors or that fraud is taking place, we will seek to conduct additional auditing procedures. 
If the auditor is not able to obtain sufficient and appropriate audit evidence and or not satisfied with the figures reported in the financial statements, the auditor may issue a qualified opinion noting the issues identified during the audit. In the worst case the auditor may have to give an adverse opinion or refuse to give an opinion on the financial statements.” 
There are many levels of mistakes and fraud, however, that auditors may actually tolerate, depending on their professional skills and ethics. Not all auditing companies have strict procedures in place when selecting clients, as KPMG does. 
And, obviously, ethics can vary, given that legal regulations in Vietnam as regards the issue are not updated to match the increasing sophistication of the domestic and global economies. “The Vietnamese Auditing Standard 240 on Fraud and Error was developed based on the corresponding international auditing standards. 
However, the international standards have been revised in recent years. The existing Vietnamese standard is not really up-to-date with the current international standards,” Mr Quan said. 
According to Mr Bui Van Mai, Deputy President of the Vietnam Association of Certified Public Accountants (VACPA), if auditors discover fraud then they must report it to senior management at the company, such as the Chairman or the Board of Management, and include warnings in their auditing reports. “But it is not the legal responsibility of an auditor to find fraud,” he said. “That is the role of government investigative bodies.” 
He pointed out that when fraud is conducted by inflating input prices, it was the role of customs offices to identify instances. “They have more information than auditors, for example in comparing the input prices of different importers and between those in Vietnam and other countries,” he said. 
The leading auditing companies only conform to those regulations and do not try to act beyond their scope because they see no realistic reason for bearing more risks than legally required. Auditing companies of less repute may even be questioned if they match the existing regulations. 
In international practice, auditing associations supervise the behaviour of auditors in terms of professional ethics because legal regulations do not cover all circumstances. “Lawyers must be members of legal associations, and so should auditors,” Mr Quan believes. “This is common international practice.” 
However, the Law on Independent Auditing passed by the National Assembly on March 29 does not include such a regulation, even though suggestions were made and discussions held on the matter. So a number of auditors in Vietnam are not members of VACPA, and their professional ethnics are therefore less supervised. 
Mr Mai from VACPA said that the association regularly and constantly examines the professional ethics of its members. “On average, we inspect a member once every three years if there are no signs of serious errors or failings,” he explained. If errors or failings are identified during this inspection, the companies will receive advice, a reprimand or a warning, depending on the gravity of their offence. In serious cases, VACPA can report them to the Ministry of Finance, which can then suspend their professional permits for one year. 
VACPA, having operated for 6 years, regularly holds training courses, workshops and conferences for its members to update their understanding of legal regulations and professional behaviour issues. “A member must spend at least 40 hours each year on study,” Mr Mai said. 
Under the new law, an auditor must have at least three years auditing experience to be able to sit national exams for an auditor certificate. And a new auditing company must have at least five certified auditors, including its Chairman and CEO, to be established.

KIM THAI (news.vneconomy)